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It’s time for a shareholder protection act

Robert Reich

Five members of the Supreme Court have defied logic by assuming that corporations are people. They are not. They are legal fictions, nothing more than bundles of contractual agreements. They are owned by their shareholders.

So what do we do now, other than wait for another Supreme Court opening, and for the President to appoint another Justice who understands this?

Push Congress to enact the “Shareholder Protection Act.”

For many years, anti-union lobbyists have pushed what they call “pay-check protection” laws, supposedly designed to protect union members from being forced, through their dues, to support union political activities they oppose. Under such laws — already in effect in several states — no union dues can be spent for any political purpose unless union members agree.

The same principle should protect shareholders from being forced to spend their share of corporate earnings in favor of or against a particular candidate. Surely a First Amendment that protects corporate free speech protects individuals no less.

Under a shareholder protection law, shareholders would not have to spend their share of corporate earnings on candidates who they personally oppose. If a company dedicates, say, $100,000 to a particular campaign in a given year — directly, or indirectly through a front organization — shareholders who don’t want their money used this way would get a special dividend or additional shares representing their pro rata share of that campaign expenditure. (Mutual funds and pension plans would have to notify their shareholders of any such political activity among the companies they’ve invested on their shareholders’ behalf, and seek their shareholders’ permission.) This way, corporate money for or against a particular candidate would be paid for only by shareholders who wanted to spend their portion of company earnings on it.

The Shareholder Protection Act is something even Scott Brown should be able to get behind. As should a Supreme Court supremely sensitive to First Amendment rights.

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Comment to "It’s time for a shareholder protection act":
    • Steve

      This could get tricky:

      (1) Would a publicly-owned newspaper company have to offer to reimburse shareholders for the salary and expenses of an employee who researches and writes an editorial endorsing a candidate? (Editorials can have as much political influence as attack ads.)

      (2) Would a publicly-owned book publishing company have to offer to reimburse shareholders for the cost of publishing a politician’s autobiography, if the book doesn’t sell well and loses money, and is published in an election year for an obvious political purpose?

      What about companies that run political polls, analyze them, and publish the report? What about the several think-tanks that are part of publicly-owned corporations?

      The problem is that corporations do a huge spectrum of different things, from obviously corrupt to obviously fine. In principle a line could be drawn somewhere for this shareholder protection idea. In practice it would be a tangle of complicated rules (as it is now), and big corporations with teams of lawyers could do whatever they want, but small corporations might be subject to lawsuit threats and intimidation for just doing their legitimate business.

      It’s a nice idea though. It may be more practical for unions, which may be simpler to regulate because for the most part they do (or should do) just one thing only: Negotiate contracts.

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